ROAS (return on ad spend) is the number every ad platform shows you, and the one people most often judge wrongly. A 3× ROAS sounds good. For a business with thin margins it can lose money on every sale. The only way to know whether a ROAS is good is to compare it with your own break-even ROAS.
What is a good ROAS?
A good ROAS is any ROAS comfortably above your break-even ROAS. Break-even ROAS = average order value ÷ what each order leaves after product, shipping, fees and refunds. As a shortcut it's 1 ÷ your margin: a 50% margin breaks even at 2×, a 25% margin at 4×. There's no universal "good" number, because it depends entirely on your margins.
ROAS itself is simple:
ROAS = revenue from ads ÷ ad spend
Spend $1,000 and make $3,000 in sales from those ads, and your ROAS is 3×, sometimes written as 300%. What ROAS doesn't tell you is how much of that $3,000 was profit. That's where break-even ROAS comes in.
How do you calculate break-even ROAS?
Start with your contribution margin: what one order leaves after every cost that comes with it, before ads.
Contribution margin = order value − product cost − shipping − payment fees − refunds − other per-order costs
Then:
Break-even ROAS = order value ÷ contribution margin
Break-even CPA = contribution margin
Break-even CPA (cost per acquisition) is the same limit in dollars: the most you can spend on ads to win one order before it loses money. At exactly your break-even ROAS, ad spend uses up the whole contribution margin and you make nothing.
If you already know your margin as a percentage, the shortcut is 1 ÷ margin:
| Contribution margin | Break-even ROAS | Break-even ROAS (%) |
|---|---|---|
| 20% | 5.00× | 500% |
| 25% | 4.00× | 400% |
| 30% | 3.33× | 333% |
| 40% | 2.50× | 250% |
| 50% | 2.00× | 200% |
| 60% | 1.67× | 167% |
| 70% | 1.43× | 143% |
Use your real contribution margin here, not your gross margin on the product alone. Shipping, payment fees and refunds all come out of each order, and together they can move break-even ROAS a long way.
A worked example: a $60 order
Take an online store with a $60 average order:
| Line | Amount |
|---|---|
| Order value | $60.00 |
| Product cost | −$18.00 |
| Shipping and packaging | −$6.00 |
| Payment fee: 2.9% + $0.30 | −$2.04 |
| Refunds: 3% of order value | −$1.80 |
| Other per-order costs | −$2.00 |
| Contribution margin | $30.16 (50.3%) |
The payment fee uses Stripe's standard rate for US cards, 2.9% + 30¢, checked on September 25, 2026.
- Break-even ROAS = $60 ÷ $30.16 = 1.99×
- Break-even CPA = $30.16. Pay more than that in ads for an order and you lose money on it.
Now say the ad account reports a 3× ROAS. Each order then cost $60 ÷ 3 = $20 in ads, which leaves $30.16 − $20 = $10.16 profit per order. Good, but less exciting than "3×" sounded.
What ROAS do you need to make a profit?
Break-even isn't the goal; it's the floor. To keep a set share of each order as profit, subtract that profit from the contribution margin before dividing:
Target ROAS = order value ÷ (contribution margin − target profit per order)
For the $60 order with a 10% profit target ($6 per order):
- Target CPA = $30.16 − $6 = $24.16
- Target ROAS = $60 ÷ $24.16 = 2.48×
That 2.48× is the number worth setting as a target ROAS in Google Ads or Meta, or watching in your reports. Below it you're still profitable, but not by as much as you planned. Below 1.99× you're losing money.
What is a good ROAS for dropshipping?
The same formula applies, but dropshipping margins are often thin, so break-even ROAS runs high. Take a $40 product:
| Line | Amount |
|---|---|
| Order value | $40.00 |
| Supplier cost including shipping to the customer | −$22.00 |
| Payment fee: 2.9% + $0.30 | −$1.46 |
| Refunds: 5% of order value | −$2.00 |
| Contribution margin | $14.54 (36.4%) |
Break-even ROAS = $40 ÷ $14.54 = 2.75×, and break-even CPA is $14.54. A campaign showing 2.5× looks healthy on the dashboard and loses about $1.46 on every order: $40 ÷ 2.5 = $16 in ads against $14.54 of margin.
That's why it's worth working out before you scale a product, not after.
Is ROAS the same as ROI?
No. ROAS compares revenue with ad spend. ROI compares profit with what you spent.
ROI = (contribution margin earned − ad spend) ÷ ad spend
In the $60 example at 3× ROAS, each order brings $60 of revenue for $20 of ads: a 3× ROAS. But the order only leaves $30.16 of margin, so the profit after ads is $10.16, and the return on the $20 is ($30.16 − $20) ÷ $20 = 51%. Two businesses can report the same ROAS and have very different ROI, because their margins differ.
What does break-even ROAS leave out?
Two things to keep in mind:
- Fixed costs. Rent, salaries, software and your own time aren't per-order costs, so they're not in the contribution margin. They're paid from the profit above break-even. A campaign that only just clears break-even isn't paying for them.
- Repeat purchases. Break-even ROAS judges the first order on its own. If customers reliably come back, you might accept a lower ROAS on the first order, but only if you know your repeat rate, not if you're hoping for it.
Also remember that the ROAS in an ad platform is that platform's own count of the sales it caused. Compare it now and then with your store's real revenue from ads over the same period.
If you're running search ads, our guide to Google Ads costs shows what clicks and leads cost by industry in 2026. On TikTok, how much TikTok ads cost shows how CPM turns into a cost per result you can compare with your break-even ROAS. To check the ROAS a campaign actually delivered, the ROAS calculator divides ad revenue by spend and shows the profit left after ads.
